Carbonite 2011 Annual Report Download - page 18

Table of Contents
We depend on data centers operated by third parties and any disruption in the operation of these facilities could adversely affect our business.
We host our services and serve all of our customers from our network servers, which are located in data center facilities operated by third parties.
While we control and have access to our servers and all of the components of our network that are located in our external data centers, we do not control
the operation of these facilities. Our data center leases expire at various times between August 2013 and January 2016, and a separate data center hosting
arrangement is cancellable by us upon 120 days notice. The owners of our data center facilities have no obligation to renew their agreements with us on
commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, we may be required to transfer
our servers to new data center facilities, and we may incur significant costs and possible service interruption in connection with doing so. During the
first half of 2012, we intend to relocate our equipment and operations from our Boston, Massachusetts data center to one of our other data centers and to
discontinue the use of our Boston, Massachusetts data center. We will incur moving and other costs in connection with this transition. Any operational
difficulties or disruptions we experience in connection with this transition could adversely affect our reputation and operating results.
Problems faced by our third-party data center locations, with the telecommunications network providers with whom we or they contract, or with
the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of
our customers. Our third-party data centers operators could decide to close their facilities without adequate notice. In addition, any financial difficulties,
such as bankruptcy, faced by our third-party data centers operators or any of the service providers with whom we or they contract may have negative
effects on our business, the nature and extent of which are difficult to predict. Additionally, if our data centers are unable to keep up with our growing
needs for capacity, this could have an adverse effect on our business. Any changes in third-party service levels at our data centers or any errors, defects,
disruptions, or other performance problems with our services could harm our reputation and may damage our customers’ stored files. Interruptions in
our services might reduce our revenue, cause us to issue refunds to customers, subject us to potential liability, or harm our renewal rates.
If the security of our customers
’ confidential information stored in our systems is breached or their stored files are otherwise subjected to
unauthorized access, our reputation and business may be harmed, and we may be exposed to liability.
Our customers rely on our online system to store digital copies of their files, including financial records, business information, photos, and other
personally meaningful content. We also store credit card information and other personal information about our customers. A breach of our network
security and systems or other events that cause the loss or public disclosure of, or access by third parties to, our customers’ stored files could have
serious negative consequences for our business, including possible fines, penalties and damages, reduced demand for our solutions, an unwillingness of
customers to provide us with their credit card or payment information, an unwillingness of our customers to use our solutions, harm to our reputation
and brand, loss of our ability to accept and process customer credit card orders, and time-consuming and expensive litigation. Third parties may be able
to circumvent our security by deploying viruses, worms, and other malicious software programs that are designed to attack or attempt to infiltrate our
systems and networks and we may not immediately discover these attacks or attempted infiltrations. Further, outside parties may attempt to fraudulently
induce our employees, consultants, or affiliates to disclose sensitive information in order to gain access to our information or our customers’
information. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, often are not
recognized until launched against a target, and may originate from less regulated or remote areas around the world. As a result, we may be unable to
proactively address these techniques or to implement adequate preventative or reactionary measures. In addition, employee or consultant error,
malfeasance, or other errors in the storage, use, or transmission of personal information could result in a breach of customer or employee privacy. We
maintain insurance coverage to mitigate the potential financial impact of these risks; however, our insurance may not cover all such events or may be
insufficient to compensate
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